Tag: Canyon Lake bankruptcy attorney

Bankruptcy Means Test is the Chapter 7 Qualification Test. However, if you do not qualify for a 7, it is also used to determine the amount of your chapter 13 plan payment. Additionally, it determines the duration of you chapter 13 plan.

If your income is above the median income your chapter 13 payment plan must last for 5 years. If below then only 3 years.

You can always file a chapter 13 which is often a much better idea than a debt consolidation. A chapter 13 is a type of debt consolidation however, you as the consumer have the upper hand. You have the power.

REAFFIRMATION AGREEMENTS

A Reaffirmation Agreement is a new promissory note to keep paying on an old contract for the purchase of goods where the lender can repossess or foreclose the goods. Because you have signed a security agreement the lender has the right to repossess or foreclose if you do not pay for it.

Chapter 7 bankruptcy discharges your personal obligation to pay the loan, or in other words, you no longer have to legally pay on the note. However, the lender still has a lien on the object(s) in question. Jewelry, refrigerators or large appliances, and most notably cars can be repossessed in this way.

What a reaffirmation agreement does: It allows you and the lender to agree that you may keep the goods so long as you continue to pay for them. When executing a reaffirmation agreement with the lender sometimes the lender will reduce the balance owing, the interest rate or both. As a result the payment and term can be reduced.

Nowadays most lenders will not reduce the interest rates and balances on cars. Home mortgages never do. You can often reduce the balance and interest rates on appliances, jewelry, computers and motorcycles.

If you do sign a reaffirmation agreement, you will have 60 days to change your mind and rescind it. Rescissions must be in writing, served on the creditor and preferably filed with the court.

MORTGAGES

You would never reaffirm a mortgage. Never. Seldom but sometimes a mortgage lender will tell a client that the client’s post bankruptcy mortgage account would show up as good credit on their credit report if the client had just done a reaffirmation agreement. It’s all the bankruptcy attorney’s fault that the client’s credit is not better than it is right now because he didn’t tell the poor client to reaffirm the mortgage.

Most mortgage companies will not do this to you, just a few. Ones that do are unscrupulous and are aiming to get you to sign your life away. They want you tied to that mortgage through the reaffirmation agreement come hell or high water. If they can just do that, then if you foreclose, maybe they can sue you. If you are in a worse position later, maybe you have to short sell, and when you do, they will ask you to pay them back sometimes, $10,000 to $50,000 in order for them to approve the short sale.

No, we don’t know what will happen, but I have a client right now who is being sued by a lender, his former first mortgage, who asked him to sign just such a promissory note in order to approve his short sale. Fortunately for him, he did not do a reaffirmation on his mortgage during his bankruptcy. Therefore, his mortgage company cannot in fact stick him with the debt, but for some reason they think that they can. Wrong, they cannot. We will be suing them soon for violating the Bankruptcy Discharge Order.

Because we do not have a crystal ball, and because the length of the term of a mortgage is so long, we NEVER sign a reaffirmation agreement on a mortgage. This is the industry standard.

CARS AND VEHICLES

Legally, WITHOUT a reaffirmation agreement the lender can repossess your car, even if the car payments are current. However, at this writing, the only companies who do are Ford Motor Credit & Jaguar Credit & California Coast Credit Union. I cannot promise that other companies will not change their policies and begin behaving like Ford.

WITH a reaffirmation agreement, as long as the payments are current, then they cannot take the car just as before the bankruptcy. However, just as before the bankruptcy, if you get behind in payments they will take the car AND sue you for a deficiency balance.

If you get behind, WITH or WITHOUT a reaffirmation agreement, they will definitely repossess the car. So, the thing to do is to ask yourself, is the economy getting better or worse? Answer: Worse, my business is constantly picking up. Everyone who comes in tells me that the business they work for is dropping off. Fewer orders, fewer sales, employees are being let go.

So, if you just keep making the payments and don’t worry about it, you have a great probability of nothing changing, and eventually once the vehicle is paid off, they will still have to give you the pink slip.

If you sign and file a reaffirmation agreement, and then change your mind, you have 60 days to do so in writing and it must be in writing, signed and filed with the court.

TEMECULA BANKRUPTCY ATTORNEY DAVID NELSON

I have been a Bankruptcy Attorney since the very beginning. Having graduated in the top 15% of my class I passed bar the first time and in June of 1994 I opened my law office. Back then there was a recession and it was just natural to open a bankruptcy practice. I saw a need and was able to fill it.

I’m an expert in the field of bankruptcy. Since 1994, I have been passionate about getting my clients out of the troubles they find themselves in. Certainly many of us might think that if we’d just planned better, we would have been able to avoid the challenges facing the country right now. While it might be true, it’s probably more accurate to say that there was no way to plan our way out of the whole economy crashing down on us.

I’ve seen first hand the blessing that Bankruptcy can bring to individuals and families. Think about this for a moment: What is it that you fight about the most? Is it too much money, “Dang what are we going to do with all these 20s honey?” No, it’s the lack of money.

But what if we could cut the arguments in half? What if we could at least take the arguments from: which debts do we pay this month with the little bit of money we have? and transform those to: how do we set up a savings for the little that we have? That’s what Bankruptcy can do for you.

If you could start the day knowing that your credit cards, medical bills, repossessed cars, 2nd mortgages, and so on were all going to just disappear, how would you feel the rest of the day?

Wouldn’t you treat your spouse better? Wouldn’t you be kinder to your children and co-workers? Wouldn’t you have a better marriage, family, career?

I’ve probably saved more marriages than most marriage counselors over the same time period. You don’t need to know how to talk to each other about money, you must do something about it.

What if you could go back to paying your tithing or your favorite charity again?

Do something about it. Make the Call Right now to set the Appointment that will change your lives. Call 800 FILE AWAY or 800 345 3292, call right now.

Chapter 13 2nd Mortgage Lien Stripping

You may be able to strip your 2nd mortgage or home equity line of credit, Heloc, off of your home in a Chapter 13. Not only can you discharge the loan, or promissory note that you signed when you executed the loan docs, but you may also be able to remove the lien from your home as well. If the Bankruptcy Judge assigned to your case agrees, then once your chapter 13 case is over, the creditor must release the lien.

You may also be able to remove the 2nd mortgage from a rental property and in addition, you may also be able to reduce the 1st mortgage as well. Rental property properties have different rules than residences do. An important distinction, you must remember that if you live in the house, you have fewer options than if you have moved out and rented the place.

IT WORKS PRETTY MUCH LIKE THIS:

A 2nd mortgage, or home equity line of credit, has two things over you:

*****a) the have the note that you signed promising to pay

b) they have a deed of trust or trust deed on the house which is a lien on the house*****

Chapter 7 Bankruptcy discharges the Note or the Loan, but you still have the Lien or Trust Deed on your house. Even after your bankruptcy, your 2nd mortgage lender can foreclose the lien, but in order to do so, it must first pay off the 1st mortgage and any unpaid property taxes.

This is a big difference between the two chapters of Consumer Bankruptcy. After a chapter 7 is over and completed, the 2nd mortgage could still foreclose on the house later. Over time, the value of the property will go up. The house will appreciate. After it’s value increases to a point where the value of the house is greater than the balance on the first mortgage, the 2nd mortgage would be in a position to foreclose the property.

So, what you do is:

1. Get an appraisal. We must be able to credibly state that the value of the home is significantly lower than the balance on the 1st mortgage. If your value is lower but close, you run the risk of expensive litigation in order to strip your 2nd mortgage or home equity line of credit. Of course, if the balance on the 2nd is large compared to the cost of the litigation, then it’s worth the effort. As long as you know that the attorney’s fees could be significant as you’re going into the deal, then it’s fine if you want to spend the money. Nevertheless, those attorney’s fees would be on a three to five year payment plan so it should be manageable.

2. If the value of the home is lower than the balance on the first and it is significantly lower, then the mortgage lender on the 2nd mortgage or Heloc, Home Equity Line of Credit, won’t fight it, and you’ll win by default.

3. If the value of the home is greater than the balance on the first, even just a little bit, then you lose and you’re stuck with the whole 2nd mortgage. Remember however, there is a difference between your primary residence and your rental properties. Respecting your primary residence, you can only remove your 2nd mortgage, or not. Rental properties however, can have 2nd mortgages removed, 1st mortgages reduced, or if the value of the home is above the balance on the 1st mortgage, the 2nd mortgage (or heloc) could be reduced so that the total balances on all mortgages are equal to the value of the property.

Caution

Chapter 7s are risky. We don’t know how long it will take the values of our real estate to increase. If you do a chapter 7, you will discharge the loan, or promissory note. Nevertheless, you will still have the deed of trust still attached to the house. So at some point you must settle that 2nd mortgage with that bank.

Chapter 13s are risky too. They can allow you to strip the 2nd mortgage off the house completely. Risky because chapter 13 (on your primary residence) requires that you immediately go back to paying your regularly scheduled monthly mortgage payments on your 1st. If the 1st mortgage has not yet been modified on the date of filing the bankruptcy, then you’d be stuck with the unmodified mortgage payments.

All chapter 13s must be approved by the judge assigned to your case. Called a confirmation order, many cases end up falling short because people who want to remove the 2nd mortgage often propose payment plans that are unrealistic. In other words the budgets they propose for themselves are just too tight. Your attorney will refer to such a budget as unfeasible. Feasibility just means that you really can afford to make the monthly payment to the bankruptcy trustee on your case. To be confirmed, a case must be feasible, and you must convince your judge and your bankruptcy trustee that you can afford to to make the chapter 13 plan payments.

Additionally, most chapter 13s never get completed once they are confirmed. More than 70% don’t get a chapter 13 discharge because something happens that derails the payment plan such as a work stoppage or an illness, or even just a busted transmission. Either your earning capacity has been reduced or your ability to pay has been eclipsed by a more pressing expense.

Stripping the 2nd mortgage off in a chapter 13 requires that you complete the payment plan. If your hypothetical plan payment is $350/mo and you pay it for 2 1/2 years that’s a total of $350 x 30 months = $10,500. What if you cannot pay it anymore because of a work stoppage, you get fired or laid off, you break your leg, your transmission goes bad? You’re not going to complete your chapter 13 payment plan. Guess what, you just tossed $10,500 out the window.

So, to strip a 2nd mortgage off of your primary residence,

the value of the property must be lower than the balance on your first mortgage

you must be able to pay the 1st mortgage payment,

you must get the judge to agree that you are able to afford the plan payment,

and you must complete the plan which will be 3 to 5 years long.

How Much Will My Chapter 13 Plan Payment Be?

Plan payments depend on a couple things

how much excess income you have at the end of the month

how much the means test says you must pay

how much you owe on unpaid mortgage payments from previously unpaid months called arrears

back taxes and child support

the balance owing on your car

how much of your attorney’s fees were paid in advance

how much you usually get as tax refunds

and several other possible issues

You will have to call for a consultation on the issue in order to get an estimate.

Call 800 FILE AWAY or 800 345 3292, call right now for a consultation.

Debt Freedom is Required for Retirement

If you’re like most of us, you’re planning to retire on your 401k or other similar Retirement plan. And you’re wondering if Walmart and McDonalds will have too many “senior” team members when you get there. Because you’re going end up with a lower income than the one that you presently cannot live on, you wonder what will you do then? Do you really think social security will be available? Even if it is, how much buying power will it have? My mom used to get the equivalent of groceries and utilities, and that was it.

Because your retirement income will most likely be lower, than your current income: If you’re still in debt at retirement time, you’re going to file Bankruptcy. Why not file right now? Put those credit card payments into your retirement accounts instead. I realize that for most of you, if you didn’t have to pay consumer debts, you would not likely be able to just switch portions of your budget over to retirement planning. You’re eating white bread from Albertsons with non-fat milk and telling yourself that it’s because the non-fat is healthier. Just to pay the gas expense, you’re wearing sweaters at night and walking to the not as good park because you can’t afford to drive to the nice one with the lake. Telling yourself and your kids that walking is good for you even though the slides are broken isn’t making you feel any better. I get it. However, what if you could have a more normal budget and maybe put at least some into savings?

RETIREMENT AND KEEPING YOUR HOME:

YOU MUST GET OUT OF DEBT. When it comes to Retirement, or Wealth Building, getting out of debt is not the FINAL step but the FIRST. Mortgages must be part of the formula. How can you Retire when you’re in debt?

Here’s what I see everyday: Your Mortgage payment is $1500/mo and your 2nd is $500/mo. In Credit Cards you have $25,000 with payments of another $500/mo. Both Mortgages have 30 year terms. At year 10 you start up a 401k plan and a personal IRA. But how much can you put into either? You’ve got $1000 in debt service going out of your budget every month. Each month before you eat, you have to pay $1000 to cyberspace or “The Man”.

Assuming you have an income of $6500/mo and take home $5300 after taxes and insurances, and that you’re married and you have 2 children living at home. First, I’d recommend, one of you must get a better job or another job as soon as possible.

$5300 Net Pay Less$2000 Mortgages$500 Debts and Credit Cards$2,800 Left after that. (the rest of the budget must be calculated.)$700 Two Car Payments$500 Gas and Travel for the two cars$100 Car Insurance$40 Medical Expenses out of pocket$800 Groceries (and everything that comes from the store) and Fast Food on the way to and from work, school and at work and school.$400 Day Care$400 All Utilities including Internet $30, Cell Phones $150, Home Heating & Cooking $100, TV $50, Water $70___________________________________

Bankrupt already, and you just didn’t know it.

Filingbankruptcy for this family would be a fantastic idea. Just think about it. Even if they were stuck with the 2nd mortgage when it was over, how much better off would they be if they could just get out of under the credit cards payments.

In a Chapter 7 Bankruptcy they must Qualify. Called the Means Test, the qualification test starts with your gross income and asks first are you above it or below it? If above, then there is an 8 page questionnaire that you must go through to see if you qualify or not, and in my experience, 97% of my clients have qualified by the time we are done with the 8 page questionnaire. In our current test case, the family makes $6,500/mo which is $78,000/yr. The Median Income for a family of 4 this year is $78,869.00 and they get to skip the 8 page test. Part three of the Qualification Test, we go their budget to see if they have any money left over when it is all said and done. Even adding that $500 from the credit cards back in leaves them negative $5.00/mo so they have qualified for a Chapter 7 Bankruptcy.

In Chapter 13 you must also Qualify, but the test is basically this, can you afford to make a payment? Why would you want to do a Chapter 13? If the value of the home is lower than the balance on the 1st mortgage, then this family could do a chapter 13 bankruptcy and strip that 2nd mortgage off of the house. In this case, they would divert the $500/mo that they are paying to their 2nd mortgage, or perhaps even a bit less depending on circumstances, and at the end of three short years, (in this hypothetical case) the 2nd mortgage is gone, the lien is released, and that $500/mo payment is gone forever starting 17 years earlier than planned.

I cannot stress this enough, what happens in month 37?

Okay, probably after a short vacation so probably in Month 40 or 45, they can now put that $500/mo that had been going into the 2nd mortgage into their retirement planning. If it goes into an IRA, Life Insurance, 401k, or whatever, at least it is now going into their future rather than huge bonuses to Citibank and Chase Mastercard’s CEOs.

I would pay the 1st Mortgage off at this point. 17 years x 12 months is 204 months x $500/mo is $102,000. Any mortgage with a $1500 payment could probably be paid off before the 17 years is over when you combine the 2nd mortgage payment with the first and pay down the first with $2000/mo instead of only $1500.

If you put the $102,000 into an IRA or a 401k how much would you have at the end of 17 more years, it’s hard to say, it could easily be only the $102,000 or it could be $250,000. What will the monthly payments be from a pot of $250,000 when you retire? I’m not a retirement planner but I’m sure it would be less than $1500/mo.

So with a chapter 7 our hypothetical family might have some breathing room.

With a chapter 13 they might be able to pay off their 1st mortgage and save for retirement. HERE’S A CREDIBLE PLAN TO RETIRE EARLY THAT CAN ACTUALLY WORK WITHOUT SELLING STUFF TO YOUR FAMILY AND FRIENDS. (Not that there’s anything wrong with that.)

It depends on the value of the house.

DO NOT WAIT, FILE NOW. YOUR HOME’S VALUE WILL START HEADING BACK UP SOON IF IT HAS NOT ALREADY. YOU MUST FILE NOW TO TAKE ADVANTAGE OF THIS.

Refinancing Your Second Mortgage

Yes, it may be an actual option. And as unlikely as it may seem or feel, if you have home equity now (at this writing in 2018) then a refinance may work but only if you have good enough credit. But how do you manage that after having filed a Chapter 7 Bankruptcy? Believe it or not, credit repair services use the same techniques outlined in the following Guide. The Attorney’s Guide to Credit Repair. It’s Fast, Easy and Guaranteed.

Your 2nd Mortgage or Home Equity Line of Credit – Heloc

While it is true that you may be able to strip these off of your home in a Chapter 13, in a Chapter 7 you can’t, but, you may still be able to effectively ignore it (for a while) and keep your home. However, the 2nd Mortgage or Heloc would still have a lien on the property. You would then have to settle the lien or deal with it in some manner later on. Your 2nd or Heloc has two things over you

a) they have the promissory note that you signed promising to pay

b) they have a deed of trust or trust deed on the house which is a lien on the house also called a mortgage.

If you have filed a Chapter 7 Bankruptcy, then the Chapter 7 discharges the Loan or Promissory Note, which means that the mortgage company or lending bank cannot collect money from you directly. They cannot sue you, garnish your wages, levy your bank account, or even ask you for money or anything like that.

If you still own the home, then you still have that 2nd Mortgage Lien called a Trust Deed or Mortgage on your property. Chapter 7 Bankruptcy does not remove that kind of lien from your house, not in the 9th Circuit Appeals Court’s jurisdiction. Therefore, if the value of the house is high enough, then your 2nd mortgage lender can foreclose that lien, but in order to do so, it must pay off the 1st mortgage and any unpaid property taxes first.

Some Things You Can Try Include, But Are Not Limited To:

1. Refinance Your Second Mortgage:Yes, it may be an actual option. But if you have bad credit, you will have to repair it first.

2. If the Value of the house is higher than the balance on your 1st mortgage then you must deal with your 2nd mortgage now. If it is lower than the balance on your first, then you don’t have to deal with them immediately, but you must deal with them eventually, because, remember, they have a lien on the house.

3. If the value is relatively close to the balance on 1st mortgage then you will have to deal with the 2nd mortgage sooner rather than later because in not too much time, the value of the house will go up high enough for the 2nd mortgage company to be able to foreclose. If you cannot afford to settle it, you should consider trying a loan modification.

4. What most clients will do is make an offer to settle the 2nd mortgage lien in one payment, one time with no balance owing afterwards, and you must get that in writing from the bank before you mail your cashier’s check. You might have to take a massive 401k loan in order to be able to make such an offer, but if they take it, it would be worth it.

5. If you have previously filed a bankruptcy and then the 2nd mortgage lender cancels the debt and sends a 1099 for the “forgiven” balance next year, then you are able to deduct the amount because it was already previously “forgiven” or when you filed your chapter 7 bankruptcy and received your chapter 7 bankruptcy discharged.

6. Most clients will save as much as possible and then when they get a tax refund next year, they add that with the savings, and if possible, sell a car or some jewelry and then use that to make an offer to settle the lien. (Dear Reader, when I originally wrote this several years ago, most homes had much lower values and so it was so much easier to offer to settle such a second mortgage. However because home values have gone up considerably, it’s nearly impossible to do now.)

7. In any case, your Discharge Order from your Chapter 7 Bankruptcy prohibits all kinds of collections. Therefore, they cannot hound you, dunn you, or bother you, whether by phone, email or letters demanding payment of the loan or promissory note. They have only one legal option, they can foreclose. It doesn’t mean that they won’t but knowing your rights, that they cannot, at least you can protect yourself. REMEMBER however, that the 2nd Mortgage must pay off the 1st Mortgage in order to foreclose.

8. If your home has significant value which it probably does, the loan modifications are an option to protect your home, and if necessary, selling your home as a method of preserving the home equity is also a great option. Not that those are the best options, but they are options. Additionally, Chapter 13 Bankruptcy may be a viable option as well.

THEREFORE, the probability of them foreclosing is lower and lower when the value of the house is lower than the balance on the 1st mortgage. It’s simple math, they won’t pay off a $200K loan to get a $150K asset that they can then resell and only recoup $150K and they’d have to pay closing costs to sell it so they’d only net $120K. That would be a loss of $80K plus they would also lose all of the 2nd mortgage too which is probably another $50K or more on top of the $80K.

HOWEVER, when the 1st and 2nd are held by the same company and particularly if that company is a credit union, it may be possible that they’d foreclose anyway but if the payment on the 1st is getting paid, then it’s still not very likely.

Overall, when dealing with a 2nd mortgage, it’s risky, no matter what happens. Achapter 13 which would allow stripping off the 2nd mortgage, is risky too. Even more so because your Chapter 13 Bankruptcy requires that you immediately go back to paying your regularly scheduled monthly mortgage payments on your 1st mortgage, and if the 1st was not yet modified on the date of filing the bankruptcy, then you’d be stuck with the unmodified mortgage payments. Also, most Chapter 13 Bankruptcies never get completed. More than 70% don’t get a chapter 13 discharge because something happens that derails the payment plan such as a work stoppage or an illness, or even something unexpected such as a busted transmission. Stripping the 2nd mortgage off in a chapter 13 requires that you complete the three to five year payment plan, so it’s majorly risky because if you have a hypothetical plan payment of $350/mo and you pay it for 2 1/2 years and then if you cannot pay anymore and you don’t get your plan completed, guess what, you just tossed $350 x 30 months out the window. That’s $10,500 that you’ll never get back, and that’s only if you get a payment that low to begin with. Most are higher.

In Summary:

Offer to Settle Your 2nd Mortgage

So, in summary, making an offer to settle the balance on the 2nd after a Chapter 7 Bankruptcy, should aim to pay (I originally wrote 10% of the balance or less, but nowadays the percentage at this writing in 2018, must be much higher). However if the house is seriously upside down on the 1st mortgage already, you may be able to offer lower. But it does have to be paid in one payment once they accept and you must get them to accept it in advance in writing. You must not pay them unless you have it from them in writing that they will accept your settlement offer and that they will RELEASE the lien once they get the payment.

I’ll say it again just in case you didn’t hear me, they must agree to RELEASE the lien in writing once they get your payment. If they don’t agree to release the lien, don’t send the check.

Refinancing Your Second Mortgage

1. Refinance Your Second Mortgage:Yes, it may be an actual option. And as unlikely as it may seem or feel, if you have home equity now (at this writing in 2018) then a refinance may work but only if you have good enough credit. But how do you manage that after having filed a Chapter 7 Bankruptcy? Believe it or not, credit repair services use the same techniques outlined in the following Guide. The Attorney’s Guide to Credit Repair. It’s Fast, Easy and Guaranteed.

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Disclaimer

Nothing in this article may be mistaken as legal advice. Attorney David Nelson, is licensed only in California, and this article is intended only for readers in California. This article is for entertainment, educational, extra-curricular, and medical purposes only. If you decide to rely on this, heaven help you.

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